New Form ITR-BN Mandates Reporting of Undisclosed Income Starting April 2026

The Central Board of Direct Taxes introduced Form ITR-BN for taxpayers facing block assessment proceedings after an income-tax search or requisition, with the rules applying from April 1, 2026.

The return was notified through Notification No. 97/2026 dated July 24, 2026, under the Income-tax (Third Amendment) Rules, 2026. The rules cover searches initiated under Section 247 and requisitions made under Section 248 of the Income-tax Act, 2025, on or after April 1, 2026.

The filing is not a voluntary disclosure option. An Assessing Officer must first issue a notice under Section 294(1)(a), requiring the taxpayer to report undisclosed income for the relevant block period.

The notice may allow up to 60 days for filing. The return cannot later be revised.

The return covers income, not just seized valuables

The new filing applies to total undisclosed income identified during the block period. That may include money, jewellery or bullion, but also unrecorded business income, unexplained spending, incorrect deductions and transactions omitted from the books.

Taxpayers must report the amount under the applicable income heads: salary, house property, business or profession, capital gains, and other sources. Each amount must also be assigned to the relevant tax year.

The item-level schedules go further. They cover valuable articles, virtual digital assets, unexplained expenditure, incorrect expense, exemption, deduction and allowance claims, international transactions, specified domestic transactions, book entries and any other undisclosed income.

Each category includes a remarks field of up to 100 words. Cryptocurrency and similar holdings may therefore enter the calculation when they represent undisclosed income during the block period.

One return can span six earlier years and later periods

The block period is not limited to the year in which officials began the search. The form uses the labels Y6, Y5, Y4, Y3, Y2, Y1, Y0 and, where applicable, Y+1.

Y6 through Y1 represent the six tax years before the tax year in which the search began or the requisition was made. Y0 covers the period beginning April 1 of that tax year and ending when the last search or requisition authorisation is executed, subject to the timing of that execution.

If the final authorisation is executed in a later tax year, Y0 generally covers the complete tax year in which proceedings began. Y+1 then covers the period from April 1 of the later year through the execution date.

Consider a search initiated on September 15, 2026, with the final authorisation executed on September 20, 2026. The block period would generally include the six tax years preceding Tax Year 2026–27 and the period from April 1, 2026, to September 20, 2026.

If execution instead occurred in May 2027, Y0 would cover the complete Tax Year 2026–27. Y+1 would cover April 1, 2027, through the execution date in May 2027.

Proceedings involving an “other person” under Section 295 can have special or shorter block periods. That provision may apply when seized material or related information indicates that undisclosed income belongs to, relates to or pertains to someone other than the person searched.

Earlier reported income remains subject to exclusions

A block assessment does not automatically tax every rupee earned during the covered years again. Section 293 excludes income that, subject to its conditions, was reported before the search, determined in an earlier proceeding, properly recorded in books kept in the normal course or covered by another specified exclusion.

The Assessing Officer can still recompute an amount treated as recorded if search evidence shows that it was undisclosed. The determination may draw on seized evidence, requisitioned material, survey evidence and other information available during the proceedings.

That makes reconciliation necessary before filing. Taxpayers should compare the proposed figures with earlier returns, assessments, financial statements, tax-audit reports, books of account and supporting records.

Part A asks for the date of each earlier return, the filing section, the form used, the acknowledgement or receipt number, declared total income and income determined after processing. It also asks about pending assessment or reassessment proceedings, international transaction values and specified domestic transaction values.

The form accommodates years governed by both the Income-tax Act, 1961 and the Income-tax Act, 2025. The block period can cross the change in legislation.

A block return does not replace the annual return

A taxpayer may need to use provisional figures in the block return when a tax year has ended but the ordinary filing deadline has not expired. Those figures do not become the regular annual return.

The applicable regular return must still be filed, with the relevant income included. Income other than undisclosed income for the year in which the final authorisation is executed is also handled separately under the regular provisions.

The block return is consolidated, not a separate filing for every year. Its income must nevertheless be allocated year by year.

The filing window is limited and mistakes cannot be corrected by revision

Section 294 does not permit a person who has furnished the block return to file a revised version. Errors in allocating income, duplicating amounts already reported, omitting seized assets or applying the wrong legal classification can therefore affect the assessment from the first filing.

A further extension of up to 30 days may be available in a narrow audit-related situation. The immediately preceding tax year’s return deadline must not have expired when the search began, the taxpayer must have been required to obtain a tax audit, the accounts must still have been unaudited when the notice was issued, and the taxpayer must make a written request for time to complete the audit.

That extension is not a general entitlement. A late return is also not treated in the same manner as one filed within the period stated in the notice.

Undisclosed income faces a 60% basic tax rate

Section 192 imposes a flat 60% rate on the total undisclosed income determined for the block period. The calculation can also include surcharge, health and education cess at 4%, interest under Section 298(1), eligible tax credits and the resulting balance payable or refundable.

The final liability can exceed the basic 60% rate when surcharge and cess apply. Separate schedules cover self-assessment tax paid for the block period, advance tax or self-assessment tax not claimed earlier, and unused TDS or TCS credit.

Those credits remain subject to verification by the Assessing Officer. Taxpayers should check challans, BSR codes, challan serial numbers, Form 26AS, Annual Information Statement records and TDS certificates before completing the schedules.

Late filing carries simple interest under Section 298 at 1.5% of the tax for every month or part of a month. The calculation begins on the day after the notice period expires and continues until the block assessment is completed.

The Assessing Officer or Commissioner (Appeals) may also direct a penalty equal to 50% of the tax chargeable on undisclosed income determined by the Assessing Officer. Protection may apply to income properly disclosed in the return when statutory conditions are met, including filing under Section 294, paying the stated tax or offering seized money for adjustment, providing payment evidence and not appealing the assessment of that disclosed income.

Any excess income determined over the amount reported in the return may remain exposed to penalty.

Non-residents and cross-border taxpayers must disclose status and transactions

The form applies across taxpayer categories, including individuals, Hindu undivided families, firms, companies and other persons. It also includes fields for resident, resident but not ordinarily resident and non-resident status, along with domestic and foreign company classifications.

An NRI or foreign company is not excluded merely because of non-resident status. The trigger is the qualifying search or requisition and the subsequent Section 294 notice.

A person with cross-border affairs may need records covering overseas employment or business, India-to-foreign remittances, foreign bank and investment accounts, jewellery ownership, cryptocurrency, overseas property, cross-border loans and gifts, and foreign company or trust records.

An overseas asset alone does not establish the amount taxable in India. Residential status, source of funds, the relevant tax year, previous disclosures and supporting evidence all affect the classification.

The filing also contains fields for international transactions and specified domestic transactions. Amounts from such transactions that fall within a part tax year covered by Section 293(5) may instead be assessed outside the block process and should be separated from the block return.

Records should be assembled before verification

A taxpayer receiving a Section 294 notice should gather the search authorisation, panchnamas, notice and Document Identification Number, as well as copies of returns filed for every block year.

The working file should also include assessment, reassessment and appellate orders; tax-audit and transfer-pricing reports; books and financial statements; bank, demat and investment statements; purchase invoices and valuation reports for jewellery and valuables; cryptocurrency exchange and wallet records; property documents; expense vouchers; and TDS, TCS and tax-payment records.

Explanations should link seized material to the correct tax year. The year-wise reconciliation should be finished before verification and submission because the filing cannot be revised.

The new framework therefore differs sharply from a regular annual return. A normal return covers one tax year and reports regular total income under ordinary filing provisions. This block return responds to a Section 294 notice, covers the entire applicable period and reports undisclosed income, with the filing deadline fixed in the notice rather than by the ordinary calendar.

The first rules now apply to searches initiated or requisitions made on or after April 1, 2026. A taxpayer who receives the statutory notice must distinguish earlier disclosed income, properly recorded amounts, search-detected income, year-specific allocations and items that still belong in regular annual filings.

This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.